US Manufacturing Employees More Productive Than Ever

It turns out that the US private sector lost 203,000 jobs over the last ten years. While we suspect a bit of data mining bias given we are comparing a peak versus a trough for the most recent ten years, it is still undoubtedly a shocking number.

The Big Picture: In the 1940s, we created 10 million jobs. In the 1990s, we added 19 million new jobs. Even during the much-maligned 1970s, we added almost 16 million jobs. The 2000s might be zero.

Worse yet, manufacturing has been hit particularly hard. Taking The Big Picture's data further, Econompic shows us that the size of the US manufacturing workforce has shrunk massively... back to 1941 levels.

This is obviously a surprising statistic. One's first knee-jerk reaction is to think US manufacturing must be in some kind of downward spiral.

Yet in reality, US manufacturing output is near the highest level it has ever been, even in inflation-adjusted dollars.

So what gives?

While the US manufacturing workforce has shrunk recently, it has nevertheless continued to become more productive. In fact, US manufacturing employees today create more value per person than ever before. They could even be the best in the world by this measure.

So US manufacturing isn't dead at all. It's just moving up the value chain and becoming highly efficient. The result is that US manufacturing workers of today are nothing like those in 1941. Today they are a far more skilled group of people. They're almost eight times as productive in real dollar terms due to their better abilities and the increased application of technology.

While those who are displaced from work need help badly, and we understand the hardship of being unemployed, at the same time one has to realize that the chart above is what makes standards of living rise. To stop the above productivity line from continuing to rise would be one of the worst things the US could ever do to itself economically.

The key isn't to fight productivity gains, but to find out how we can reallocate displaced workers into parts of the economy where their efforts can be translated into increasingly productive endeavors.